Business Cycle - History - Classification By Periods

Classification By Periods

In 1860, French economist Clement Juglar identified the presence of economic cycles 8 to 11 years long, although he was cautious not to claim any rigid regularity. Later, Austrian economist Joseph Schumpeter argued that a Juglar cycle has four stages: (i) expansion (increase in production and prices, low interests rates); (ii) crisis (stock exchanges crash and multiple bankruptcies of firms occur); (iii) recession (drops in prices and in output, high interests rates); (iv) recovery (stocks recover because of the fall in prices and incomes). In this model, recovery and prosperity are associated with increases in productivity, consumer confidence, aggregate demand, and prices.

In the mid-20th century, Schumpeter and others proposed a typology of business cycles according to their periodicity, so that a number of particular cycles were named after their discoverers or proposers:

• the Kitchin inventory cycle of 3–5 years (after Joseph Kitchin);
• the Juglar fixed investment cycle of 7–11 years (often identified as 'the' business cycle);
• the Kuznets infrastructural investment cycle of 15–25 years (after Simon Kuznets also called building cycle]);
• the Kondratiev wave or long technological cycle of 45–60 years (after Nikolai Kondratiev).

Interest in these different typologies of cycles has waned since the development of modern macroeconomics, which gives little support to the idea of regular periodic cycles.